Gary Owen Burgess v Susan Natalie Beaven

JurisdictionNew Zealand
CourtCourt of Appeal
JudgeHeath J
Judgment Date20 Dec 2010
Neutral Citation[2010] NZCA 625
Docket NumberCA 371/2009

[2010] NZCA 625

IN THE COURT OF APPEAL OF NEW ZEALAND

Court:

Harrison, Wild and Heath JJ

CA 371/2009

Between
Gary Owen Burgess
Appellant
and
Susan Natalie Beaven
Respondent
Counsel:

G O Burgess, in person, Appellant

A M Corry for Respondent

Appeal against a High Court decision which declined to make an order under s145A Land Transfer Act 1952 (early lapse of caveat against dealings) that a caveat not lapse — director of the respondent company had used fraudulently obtained funds from the appellant to purchase the properties — property purchased by a related entity with fraudulently obtained funds where properties were purchased at market value and then on-sold at a significantly higher price (funded by loans from the appellant) to front people — whether the respondent had purchased the property in good faith — whether a constructive trust existed over the property in favour of the appellant — ability to trace stolen money in equity.

Held: There was no reason why the equitable remedy sought by Trustees Executors should be unavailable because one element of the fraudulent scheme was the entry into a loan contract with Champion. Under that agreement, Trustee Executors had unwittingly loaned money on a false understanding of the risk it was taking on, and was unaware that the was providing M with the ability to skim off funds for his own or an associate's benefit. The effect of the HC decision was to confine Trustee Executors to the exercise of contractual and statutory rights against only the party with which it had a contract (Champion).

It was reasonably arguable that M had participated in a fraudulent scheme which involved the obtaining of loans from Trustee Executors to entities associated with M. It was also reasonably arguable that some of the proceeds of that fraud were invested by M through entities and persons associated with him in properties. The Mt Eden property had previously been held in the name of two companies controlled by M. There was no evidence as to what resources Champion had access to in order to perform its obligations in purchasing the property. It appeared that the proceeds from another sale of a property owned by a relative of M (and funded by loans from Trustee Executors) had been used by Champion in relation to the purchase.

Trustee Executors had therefore established that it was reasonably arguable that M/Champion obtained money by fraud and used those funds to purchase the property. The prerequisites of the creation of an institutional constructive trust had been satisfied. It was reasonably arguable that Eden was not a purchaser in good faith and it knew of M and Champion's fraud. It was then reasonably arguable that Eden now held its equity in the property as trustee for Trustee Executors under the institutional constructive trust.

There was controversy about the ability to trace stolen money in equity. The Court did no more than hold it was reasonably arguable that the requirements for a declaration that an institutional constructive trust existed were satisfied. That conclusion did not bind the HC when it heard the substantive case.

Appeal allowed. The order of the HC was quashed and the caveat was ordered not to lapse.

JUDGMENT OF THE COURT
  • A. The appeal is allowed and the declaration of unequal sharing of relationship property made in the Family Court's judgment of 30 June 2008 is set aside.

  • B. Ms Beaven shall pay to Mr Burgess the sum of $22,000 within three calendar months of the date of this judgment.

  • C. Ms Beaven is entitled to retain as her separate property the benefit of her post-separation dealings with Woodbury in terms of [50] of this judgment.

  • D. Leave is reserved to apply to the Family Court, in terms of [51] of this judgment.

  • E. No order as to costs.

REASONS OF THE COURT

(Given by Heath J)

Introduction
1

Mr Burgess and Ms Beaven married on 18 May 2002. They separated just over a year later, on 20 May 2003. Regrettably, nearly eight years on, despite their short marriage and few assets, relationship property proceedings remain unresolved.

2

On 3 June 2009, this Court granted an extension of time to apply and leave for Mr Burgess to appeal from a judgment given in the High Court at Christchurch on 27 November 2007. 1 The reason for allowing leave was a concern about the approach taken in the Family Court (upheld by the High Court) to assessment of the financial contributions of the marriage partners, in the context of a marriage of short duration. 2

The procedural history
3

The substantive relationship property proceeding was heard by Judge Strettell, in the Family Court at Christchurch. 3 Leaving to one side credits given to each party for post-separation contributions, the Judge considered that Ms Beaven's contributions to the marriage justified an unequal sharing of relationship property. Ms Beaven received 65 per cent and Mr Burgess 35 per cent.

4

Mr Burgess' appeal was heard by John Hansen J, in the High Court. 4 In effect, the Judge considered that $44,000 should be brought back into account for relationship property purposes. He found that a forgiveness of debt from Ms Beaven's mother had not (contrary to the Family Court Judge's view) been forgiven.

5

That finding required a sum of $40,000 to be brought back to account for relationship property purposes. 5 In addition, because the Judge also found that Ms Beaven used a sum of $4000 from the proceeds of sale of Mr Burgess' pre-marriage property to effect cancellation of a contract to acquire a re-locatable home for another property they were purchasing in North Canterbury, 6 a further adjustment was required. The Judge remitted the proceeding to the Family Court for “[reassessment of] the relative percentage contributions of the parties in the light of [his] judgment”. 7

6

On 30 June 2008, following receipt of written submissions, the Family Court delivered a second judgment. 8 While having regard, arithmetically, to the findings made by the High Court, 9 the Judge declined to reconsider any questions of valuation in respect of the relationship property in issue. 10

7

On reconsideration, Judge Strettell adjusted the percentages in which Mr Burgess and Ms Beaven were entitled to share in relationship property. The amended apportionment was 62 per cent (Ms Beaven) and 38 per cent (Mr Burgess). 11

8

Mr Burgess appealed against the second Family Court judgment, on the ground that the Judge was wrong not to enter into a reconsideration of valuation issues. That appeal was dismissed. 12 Fogarty J took the view that there was an issue estoppel created by the absence of any finding by John Hansen J that the Judge had erred in his approach to the valuation issue. On that basis, he held that Judge Strettell had been right to regard the valuation point as incapable of relitigation. 13

9

Because of Fogarty J's views, Mr Burgess sought an extension of time and leave to appeal against John Hansen J's judgment. He did not seek to challenge the judgment given by Fogarty J. In granting leave, this Court said:

[22] The effect of Judge Strettell's decision was to give the principal benefit of this price inflation over the period of the marriage to the respondent. (It will be recalled that the parties' non-financial contributions during the marriage were equal.) This result was achieved as a result of:

(a) the time at which the parties' financial contributions were assessed (one at the beginning of the marriage, one at the end); and

(b) the fact that the parties decided to sell the applicant's house and retain the respondent's house, rather than the other way round.

If the parties had chosen instead to retain [Mr Burgess'] house and to sell [Ms Beaven's] house, on the logic of Judge Strettell's reasoning [Mr Burgess] would have made the greater contribution. Such an analysis seems to us, arguably at least, to be wrong in principle, and to produce an unjust outcome.

The Court took the view that it was “strongly arguable that an injustice [had] been done”. 14

The relationship property
10

Although Mr Burgess suggested that he and Ms Beaven lived in a de facto relationship before their marriage, it is unnecessary to traverse that issue because it could have no material effect on the outcome of the appeal. We record Ms Beaven's denial of that allegation.

11

At the time of their marriage, Mr Burgess and Ms Beaven each owned properties in Christchurch. Mr Burgess' property was in Wychbury Street (Wychbury), while Ms Beaven's was in Woodbury Street (Woodbury). On their marriage, each of those properties were classified as relationship property. 15

12

Mr Burgess and Ms Beaven decided to pool their financial resources to purchase a property in North Canterbury. As both of them were involved in the

viticulture industry, they were interested in developing a vineyard. In July 2002, in furtherance of that joint goal, Mr Burgess sold Wychbury. The sale price was $129,500; as against a Government valuation as at September 2001 of $130,000. Taking into account repayment of a mortgage and other costs associated with sale, the net proceeds of sale were about $69,000. 16 Those proceeds were used to buy a property in Medbury, in North Canterbury (Medbury).
13

Medbury was purchased in August 2002, for $144,000. In addition to funds injected from the sale of Wychbury, a mortgage was obtained from SBS Bank, in the sum of $75,000. In addition, because Mr Burgess and Ms Beaven had registered as a partnership, for GST purposes, a refund of approximately $16,000 was obtained from that source. For the purposes of dividing relationship property, Judge Strettell valued Medbury at $252,000; a valuation fixed as at the date of the first Family Court hearing, in the early part of 2007, 17 about four years after...

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7 cases
  • Burgess v Beaven
    • New Zealand
    • Supreme Court
    • 9 Agosto 2012
    ...OF THE COURT A The appeal is allowed and the cross-appeal is dismissed. B Orders B, C and D of the decision of the Court of Appeal [2010] NZCA 625 are set aside. C The awards of costs made against Mr Burgess by John Hansen J in the Stream A litigation are set aside and in their place Mr Bur......
  • Burgess v Malley & Co
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    • Court of Appeal
    • 13 Septiembre 2017
    ...Christchurch FAM-2005-009-3126, 23 April 2010; aff’d Burgess v Beaven HC Christchurch CIV-2010-409-876, 4 October 2010. Burgess v Beaven [2010] NZCA 625, [2011] NZFLR appeal to $30,046.25.13 The calculation did not take into account a number of unpaid costs awards in favour of Ms Beaven. [2......
  • Burgess v Beaven
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    • 21 Abril 2015
    ...Beaven FC Christchurch FAM-2005-009-3126 , 23 April 2010 at [64]–[65]. 19 Burgess & Beaven , above n 14. 20 Burgess & Beaven [2010] NZCA 625 , [2011] NZFLR 609. 21 Burgess & Beaven HC Christchurch CIV-2010-409-876 , 24 May 2011. 22 Burgess & Beaven [2011] NZCA 422 . 23 Burge......
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    • 22 Septiembre 2011
    ...Judge declined to revisit his approach to the timing of the valuation of the contributions but revised his 1 2 3 4 5 6 Burgess v Beaven [2010] NZCA 625, [2011] NZFLR Burgess v Beaven FC Christchurch FAM-2005-009-3126, 16 May 2007. See [67]–[73]. At [79]–[80]. See s 14(2)(c) of the Property ......
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